Hungary Proposes Tax on Internet Data Transfers

23 Oct 2014

Hungary decided to propose a new tax on Internet data transfers as a way to deal with their budget crisis. The tax is 150 forints, equivalent to 62 cents, per gigabyte of data traffic.

The move was met with instant criticism. Consumers formed a Facebook group to protest the new tax. The people believe “the providers will pass on to them.” They also plan on a protest outside the Economy Ministry on Sunday. From Reuters:

Prime Minister Viktor Orban’s government has in the last few years imposed special taxes on the banking, retail and energy sectors as well as on telecommunications providers to keep the budget deficit in check, jeopardising profits in some sectors of the economy and unnerving international investors.

Economy Minister Mihaly Varga defended the move on Tuesday, saying communications technology has changed the way people use telecom services and therefore the tax code needed to be changed. His ministry said it expects the tax to generate annual revenue of 20 billion forints.

According to 2013 statistics, the country reached 1.15 billion gigabytes. Mobile internet alone reached 18 million gigabytes. With these stats, Hungary would gain over 175 billion forints ($721 billion).

However, the new tax allows companies to “offset corporate income tax against the new levy.” Equilor Securities said Magyar Telekom could pay 10 billion forints ($41 billion) without any limits on the tax.

“Although corporate taxes offset this amount Magyar Telekom has paid only 200-300 million forints worth of such tax in recent years because its parent company used tax breaks,” said the company. “The company could theoretically pass on the burden to its clients but that requires a business policy decision so it’s too early to say much about that. The tax could, however, boost uncertainty about a resumption of dividend payments at Magyar Telekom.”

The proposal hit Magyar Telekom’s shares on the market. It went down 2.9% on Tuesday. They also said the tax will “undermine planned investments in broadband network infrastructure.” The tax could force companies to raise prices, which would force consumers to pay a higher price.